Must a Partial Claim be deducted from the Net Proceeds of a Preforeclosure Sale?
Yes, when using the Preforeclosure Sale Program after a Partial Claim was provided on an earlier default, the mortgagee must include the amount of the Partial Claim when calculating total indebtedness for the purpose of a Preforeclosure Sale and to meet the 63% negative equity ratio calculation. In order to be in compliance, mortgagees must include the unpaid principal balance, accrued interest, and the Partial Claim amount to correctly calculate the total outstanding mortgage indebtedness. HUD must net a minimum 82% of the sales proceeds from the Preforeclosure Sale. Refer to Mortgagee Letter 2003-19, dated November 20, 2003.
